Court holds that states have choice whether to join medicaid expansion

Posted Thu, June 28th, 2012 11:16 am by Kevin Russell

The Court’s decision on the constitutionality of the Medicaid expansion is divided and complicated. The bottom line is that: (1) Congress acted constitutionally in offering states funds to expand coverage to millions of new individuals; (2) So states can agree to expand coverage in exchange for those new funds; (3) If the state accepts the expansion funds, it must obey by the new rules and expand coverage; (4) but a state can refuse to participate in the expansion without losing all of its Medicaid funds; instead the state will have the option of continue the its current, unexpanded plan as is.

The votes for this outcome are divided among several opinions. Three Justices – the Chief, Justice Kagan, and Justice Breyer – took the position that depriving a state of all of its Medicaid funding for refusing to agree to the new expansion would exceed Congress’s power under the Spending Clause. Although Congress may attach conditions to federal funds, they concluded, it may not coerce states into accepting those conditions. And in this case, taking away all the states’ funds for the entirety of its Medicaid program just because it disagreed with a piece of the program would be coercive. But the remedy for that constitutional violation is not to declare the expansion unconstitutional – such that even states that want to participate would not have the option. Instead, the plurality held that the provision of the statute that authorized the Government to cut off all funds for non-compliance with the expansion was unconstitutional. The result is that states can choose to participate in the expansion, must comply with the conditions attached to the new expansion funds if they take that new money, but states can also choose to continue to participate only in the unexpanded version of the program if they want.

Justices Ginsburg and Sotomayor would have held the entire expansion program constitutional, even the provision threatening to cut off all funding unless states agreed to the expansion. Their votes created a majority for the proposition that the overall expansion was constitutional, and that states could choose to participate in the expansion and would have to comply with the expansion conditions if they did.

But there was still no majority about what to do about the states that do not want to participate in the expansion – the Chief Justice’s 3-Justice plurality voted to strike down the provision allowing the Government to withhold all funds from states that reject the expansion; Justices Ginsburg and Sotomayor voted to uphold it.

The deadlock was broken by the dissenters. Justice Scalia – writing on behalf of himself, and Justices Kennedy, Thomas, and Alito – agreed with the Chief’s plurality that the threat to withhold all funds was unconstitutionally coercive. But they would have held that the consequence is that the entire expansion program should be stricken. The result would have been that even states that wanted to participate in the program could not. The plurality’s approach of simply striking down the provision that allowed withholding all funds if the state refused the expansion was, in the dissenters’ view, tantamount to rewriting the statute.

At this point, that meant that there were 2 votes to uphold the expansion in its entirety, 4 votes to strike the entire expansion down, and 3 votes to strike down only the provision withholding all funds for non-compliance with the expansion mandate. So where does that leave things?

Fortunately (for the sake of clarity at least), Justices Ginsburg and Sotomayor resolved the ambiguity by voting with the plurality on the remedy question. That is, these Justices voted that if the statute was unconstitutionally coercive, then the remedy would be only to strike down the all-or-nothing sanction.

The consequence was a bottom line of 7 Justices – the Chief, Breyer, Kagan and the four dissenters – finding the expansion unconstitutional. But a different majority – the Chief, Ginsburg, Breyer, Sotomayor and Kagan – held that the remedy for the violation was to strike down only the provision allowing the federal government to withhold all Medicaid funds unless a state agrees to the expansion.

Upcoming Oral Arguments

3/31Kimble v. Marvel Enterprises, Inc. Whether the Court should overrule Brulotte v. Thys Co., which held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se”.

On Monday afternoon Justices Anthony Kennedy and Stephen Breyer testified before the House Appropriations Committee. The purpose of the hearing was to discuss the Court’s budget for the next fiscal year and the federal judiciary, but the legislators also took full advantage of the occasion to touch on other topics as well.